How to develop the next-generation leader

Objectivity is critical, especially in a family business

Preparing a plan to develop the next-generation leader requires a comprehensive, objective analysis. It should cover where the business should go over the next several years, and what skills the next leader will need to take the company in that direction.

Ensuring the long-term success of your business requires the development of the next-generation leader. This process is called succession planning. Planning for the orderly transition to the next-generation leader shouldn’t be left to chance, or the hope that your son or daughter working in the business will be ready to lead when you decide to step down.

This article will describe an experience with a hypothetical shop owner, Tom (a composite of several real business owners I’ve worked with through the years), to help explain a process that helps family business owners pass on the torch. Ultimately, it’s about finding the right successor who will be the best fit for the business and the people who work there.

Seeing the World Differently

While working with Tom, owner of an 80-year-old, second-generation, $7.5 million metal fabricator, I asked what his plans were for the business. He said his brother, who did not work at the company, had urged him to sell the family business because of increasing competition and a poor economy. I could see this was causing him pain.

I asked him about Joe, his son in his early 30s who worked in the business. He had a nonbusiness degree and lived a different lifestyle from his father. Tom said he wasn’t sure Joe wanted to work in the business, and from what he saw, Joe did not exhibit the kind of work ethic he remembered having when learning the business years ago. He viewed that as evidence of Joe’s lack of commitment to
the business.

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I recommended that Tom conduct a DiSC® assessment of his management team. The acronym stands for dominance, influence, steadiness, and conscientiousness. A DiSC assessment measures personality and behavioral style. It does not measure intelligence, aptitude, mental health, or values. The profiles describe behavior in various situations—for example, how you respond to challenges, how you
influence others, your preferred work pace, and how you respond to rules and procedures.

The assessment showed that Tom and Joe had very different styles. Joe was a strong “I” and Tom was a strong “D.” High “D” people are often described as demanding, strong-willed, driving, determined, ambitious, aggressive, and pioneering, and as such tend to have a direct, traditional style of management; a strong “D” can see their way as the only way. A strong “I”, on the other hand, may
manage more through persuasion. They are often described as convincing, magnetic, political, enthusiastic, persuasive, warm, demonstrative, trusting, and optimistic. Clearly, Tom and Joe saw the world differently.

During several strategic planning meetings, I saw how other managers responded to Joe, and that he had a real vision for the business. I discreetly asked Joe about his future plans, and he said he assumed that one day he would take over, but that his father really didn’t talk about it.

Watching father and son work together provided real insight into both family dynamics and a clash of styles in the workplace. Tom said his son didn’t seem committed. He recalled his own youth and his approach to learning the business and preparing himself. Before taking over the company 15 years ago, Tom took accounting classes and sought business training to prepare for a life of company
leadership. Joe, he said, didn’t seem to show any interest.

I pointed to their styles, that Joe’s strong “I” was very different from his “D,” but that shouldn’t cause Tom to think Joe wasn’t interested. My impression was that Joe believed he would be taking over, and I thought they should talk about it. I could see this made Tom very uncomfortable. I suggested a process that might make this easier and allow Joe the opportunity to show his dad that he
was interested in taking over the business and willing to work on his own development. Tom agreed, and I outlined the process.

An Objective Planning Process

First, Tom followed advice of Stephen Covey, author of The Seven Habits of Highly Effective People. He began with the end in mind as the starting point. Tom looked forward in time using the recently finished strategic plan and projected what the business will be in terms of size (both in dollars and number of employees), markets served, products produced, and complexity of
operations. This was an important step, since Tom had to understand the nature of the business when Joe is expected to take over.

Second, he developed a job description as if he were planning to recruit an outside hire for this position. Tom identified key deliverables for the future CEO, as well as the skills and competencies that person should have to be qualified for the role and produce the outcomes identified in the job description. This took quite a bit of time and attention, because as Tom was thinking
about his business in the future, he couldn’t help but think about Joe’s abilities. I reminded Tom that Joe may never be the CEO, but the business will require a leader in the future, and no matter what, one of Tom’s most important roles is to provide that leader.

The third step—and this was particularly challenging—involved bringing Joe into the process. To Tom’s credit, he called on his plant manager, Bill, to lead this effort. Bill and I met with Joe to explain the process, really gauge his interest, and then tasked him with preparing his own development plan. Tom relied on Bill and me to help objectively determine if Joe had the capacity
and potential to grow to the next level, do the work, and lead the business.

Fourth, Joe took the job description Tom developed and prepared a detailed inventory of his current skills and competencies. He compared these to those identified in the job description for the future leader. Joe then identified the gaps that existed between his current skills and competencies and those in the job description—that is, he performed a gap analysis. The last and most
important part was for Joe to prepare a development plan to close those gaps. The plan needed to have sufficient detail, with dates and milestones, so it could be used as a tool that would allow Tom and Bill to manage and hold Joe accountable.

Joe worked on his plan for several weeks, after which he presented it in a formal setting to Tom, Bill, and me. I was concerned that if Joe’s presentation was incomplete or had some gaps, Tom might say something that could hurt Joe or damage their relationship. For this reason, we created a “safe” environment for Joe to make his case. He would present without comment from us and leave the
room. We then would discuss what we heard and call Joe back into the room.

Joe presented a detailed and well-thought-out plan that accurately assessed his skills and competencies. He presented it with a strong marketing flair, and he incorporated many good and creative ideas for acquiring the needed skills, competencies, and experiences. His presentation had passion, content, and vision for the future.

Following his presentation, Joe stepped out. We looked over at his father, who gave us a broad smile. Tom was exuberant about the content, quality, and delivery of Joe’s presentation. He beamed with pride, and for the first time felt his son could grow to become the next-generation leader.

Tom called Joe back into the room, and we delivered the feedback. This was a proud moment for Joe. He finally thought of himself not just as someone who happens to work in his father’s business; he was the person who would run things one day.

Fifth, the plan was officially formalized, and resources and time were allocated to enable Joe to work on the plan. Joe’s current “day job” changed to incorporate work in various parts of the business. He received more day-to-day coaching from Bill, and he was included in financial reporting and planning meetings Tom used to do himself.

Sixth, Tom set regular appointments for status updates from Joe and Bill to ensure the plan was on track. After a three-year transition, Joe became the company president in 2011, and Tom became a part-time chairman, spending a significant portion of his time on new-product development and sourcing new customers.

Becoming the Next CEO

The company’s succession plan avoided certain pitfalls. First, it made sure Joe had time to learn all aspects of the business. It eased Joe’s daily workload so he could work in other departments. Everyone recognized that Joe’s job was to learn and develop. It was, in essence, to become the next CEO.

Tom had to accept that while he had a very strong idea about the steps Joe should follow to become the next-generation leader, there is more than one way to develop those skills and competencies. As long as Joe was learning and growing, Tom had to accept the fact that he and Joe looked at the world through different lenses. Tom also called on Bill to be Joe’s primary mentor, to minimize the
father-son kind of conflicts that frequently develop.

Preparing a plan to develop the next-generation leader requires a comprehensive, objective analysis. It should cover where the business should go over the next several years, and what skills the next leader will need to take the company in that direction.

And let’s be honest: When it comes to family, objectivity doesn’t come naturally for most of us. This is why having trusted, impartial advisers—be they your plant managers, vice presidents, or trusted advisers—is essential. They help you, as a parent and CEO, step back from the parenting role and focus on the future of your business.

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The Fabricator®

The FABRICATOR® is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971. Print subscriptions are free to qualified persons in North America involved in metal forming and fabricating.